Settlement Agreements During Redundancy: Should You Accept, Challenge or Negotiate?

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Quick answer

A settlement agreement during redundancy can provide certainty, an enhanced payment and agreed exit terms, but it normally requires you to waive the employment claims listed in the agreement. Compare the offer with what you would receive through the ordinary redundancy process, check whether the process appears fair and decide whether the additional value justifies giving up those rights. You can accept, reject or negotiate the offer.

Key takeaways​

  • Settlement agreements are voluntary and the first offer can be negotiated.
  • Separate existing redundancy entitlements from the additional settlement payment.
  • Check the business reason, consultation, selection and alternative roles.
  • The offer can include references, notice, legal fees and restrictions as well as money.
  • Employment solicitors can compare the certainty and value of the offer with potential claims.


A settlement agreement may be presented as a quicker or more generous alternative to completing a redundancy process and only receiving your basic statutory and contractual entitlements. That can be attractive, but the headline payment does not tell you whether the package is fair. You need to know what you would receive anyway, what is genuinely extra and which rights the agreement asks you to give up.


Can an employer offer a settlement agreement during redundancy?

Yes. An employer can propose a settlement agreement before or during redundancy consultation. It may offer an agreed leaving date, enhanced payment, reference and other exit terms. The agreement is voluntary, so you do not have to accept the first draft and can make a counteroffer.

If you accept voluntary redundancy under a settlement agreement, Acas confirms that the termination still counts as redundancy. Voluntary redundancies must also be counted when the employer checks whether collective consultation is required.

Settlement discussions do not replace the redundancy process automatically. If no agreement is reached, the employer should normally continue consultation and make any dismissal decision through a fair process.


Compare the offer with your existing redundancy rights

Start by separating the package into two parts:

  • Payments and benefits you may already be owed, including salary, notice, accrued holiday, redundancy pay, expenses and earned bonus or commission.
  • The additional settlement payment and improved terms offered in return for waiving the claims identified in the agreement.

Depending on your contract, service and the employer's policy, the ordinary process may provide statutory or enhanced redundancy pay, notice, holiday, a consultation process, a fair selection and consideration of suitable alternative work. Employees generally need sufficient qualifying service for statutory redundancy pay. Each year in April, the weekly-pay cap increases and the maximum statutory payment is around £22,000 (as at the time of writing).

Statutory notice ranges from at least one week to a maximum of 12 weeks, depending on service, although the contract may provide more. Salary, holiday, bonus and notice-related sums that are taxable as earnings. Statutory redundancy pay and some qualifying termination compensation may fall within the combined £30,000 threshold. [6] [9]


Is the redundancy process genuine and fair?

A settlement offer does not prove that the redundancy is a sham. Employers may use agreements to obtain certainty or offer a more generous voluntary exit. However, weaknesses in the underlying process can affect the reasonableness of the offer and your negotiating position.

Check whether:

  • There is a genuine business reason why the role or work is no longer required.
  • Consultation began before the outcome was decided and your suggestions were considered.
  • The selection pool and criteria are fair, objective and based on accurate information.
  • Pregnancy, maternity, disability-related absence or another protected factor has been treated lawfully.
  • The employer has considered ways to avoid redundancy and any suitable alternative roles.

Acas says consultation should be genuine and meaningful and take place before a final decision. Selection criteria should be fair, objective and measurable. Failures may support an unfair dismissal or discrimination claim, depending on the circumstances and your status and service.


Collective redundancy may create additional rights

Where 20 or more redundancies are proposed within 90 days, collective consultation duties may apply. Collective consultation normally starts at least 30 days before the first dismissal for 20 to 99 proposals and 45 days before the first dismissal for 100 or more. From 6 April 2026, failure to comply can lead to a protective award of up to 180 days' pay for each affected employee.


Should you accept, challenge or negotiate?

Accepting may be sensible where the package is clearly better than your ordinary entitlements, your legal claims are limited and you value a quick and certain exit. Benefits might include enhanced compensation, a guaranteed reference, an agreed leaving date and clarity about notice, holiday and bonus.

You may need more information or wish to challenge the process where the role appears to remain, scoring seems manipulated, consultation was minimal, discrimination or whistleblowing may be involved, or a suitable alternative role has not been considered. If alternative employment is offered, take care before refusing it. Suitability depends on duties, pay, status, hours, location and your circumstances, and employees normally have a four-week statutory trial period. [7]

Negotiation often provides a practical middle route. A focused counteroffer can address the parts of the package that matter most, including:

  • A higher compensation or enhanced redundancy payment.
  • Correct notice, holiday, bonus, commission, shares and benefits.
  • An agreed reference, announcement and leaving date.
  • Removal or narrowing of restrictive covenants.
  • Clear confidentiality wording and a sufficient legal-fee contribution.

However, please be aware that any counter-offer may see negotiations end, so it is best to take advice before you act. 

Acas recommends allowing a reasonable time to consider a written offer and gives at least 10 calendar days as the general minimum. This is good-practice guidance rather than a separate statutory validity condition. More time may be reasonable for a complex agreement or where an adjustment is needed.


A practical checklist before you decide

1.      Ask for the redundancy proposal, selection information and settlement offer in writing.

2.      List every payment and benefit you would receive without signing.

3.      Identify the additional value offered for settlement.

4.      Check consultation, selection, alternative roles and any protected-rights issues.

5.      Review the reference, confidentiality, restrictions, payment date and legal-fee contribution.

6.      Get independent advice before signing or making a counteroffer.


When should you contact employment solicitors?

Speak to employment solicitors where consultation or selection is disputed, the process appears predetermined, discrimination or whistleblowing may be involved, the package includes significant bonus, shares or restrictions, or the response deadline is short. An employment solicitor can separate existing entitlements from the additional offer and compare the settlement offer with the strength and value of possible claims.

Frequently asked questions

Will I still receive statutory redundancy pay if I sign?

Usually, yes. The agreement should state that statutory redundancy pay is included and identify any enhanced redundancy or separate compensation payment. Voluntary redundancy under a settlement agreement can still count as redundancy, subject to the usual eligibility rules and the wording of the agreement.

Can I reject or negotiate the offer?

Yes. Settlement agreements are voluntary. The employer may continue the redundancy process, revise or withdraw the offer, or explore another resolution. Rejection does not guarantee a better outcome and can risk negotiation ending, but you do not have to accept the first terms proposed.

Do I need independent legal advice?

Yes, if the agreement is intended to validly waive statutory employment claims. The legal adviser must explain the terms and effect of the agreement and how it affects your ability to bring the specified claims. [2] [10]

Compare certainty with the rights you are giving up

A redundancy settlement offer can be valuable when it provides meaningful additional value and suitable exit terms. Before signing, check what is already owed, what is genuinely extra and whether the package fairly reflects any weaknesses in the redundancy process.


At Springhouse Solicitors we offer a range of services, so please contact our friendly customer services team to discuss further via  hello@kilgannonlaw.co.uk or  0800 915 7777.


Disclaimer 

The above provides a general overview of areas in employment law and is not intended nor construed as providing specific legal advice.  This article is for information purposes only and is correct at the time of publication. It does not constitute legal advice.


18.10.26